September 21, 2023


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The downside of a strong jobs report? Less urgency for stimulus checks and enhanced unemployment benefits

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Call it a good news/bad news situation.


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When the Senate passed the $2.2 trillion CARES Act stimulus package by a 96-0 vote on March 25, the economy was in free fall. The S&P 500 stood at 2,475 points, and a record 6.9 million jobless claims were filed that week. Economists were talking about Great Depression 2.0.

But this time around, stimulus negations are happening with the backdrop of an improving economy. And that is reducing the political pressure for Republican and Democratic leaders to comprise.

On Friday we learned the unemployment rate dropped from 10.2% in July to 8.4% in August. That soundly beat Goldman Sachs’ estimate of 9.8%. And the U.S. added—or we should say regained—1.4 million jobs in August. That’s 10.7 million jobs added since the end of April.

And it’s not just employment that is improving better than expected: We’re seeing strong improvement in everything from housing, manufacturing, to auto sales. And while the stock market is pulling back this week, the S&P 500 opened at 3,453 on Friday, that’s 39.5% above where it was when the CARES Act was signed.

Last week Democratic and Republican restarted negations: Democrats offered to come down from a $3.4 trillion ask to $2.2 trillion, meanwhile, the White House offered to come up from $1 trillion to $1.3 trillion. Nevertheless, both offers were quickly rejected.

The party leaders have yet to negotiate this week. And Republican leaders appear to be putting talks on hold again: Senate Republicans plan to vote next week on their own $500 billion stimulus bill, which has strong Democratic opposition. Democratic leaders say they won’t sign anything below $2 trillion.

The consensus on Capitol Hill is nothing will get signed before the end of September—when U.S. lawmakers are required to approve more federal funding to stave off a government shutdown.

Both parties would like such a broad stimulus bill to include items like a second round of $1,200 stimulus checks, enhanced unemployment benefits, and another round of Paycheck Protection Program loans.

Meanwhile, the parties are in disagreement on items including a steep increase in federal aid to state and local governments, which Democrats support, and COVID-19 lawsuit immunity for businesses, which Republicans support.

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